Why BMO Capital Markets Downgraded Western Digital

A few days back, BMO Capital Markets analyst Tim Long downgraded the rating on Western Digital (WDC) stock to “market perform” from “outperform.” Long expects WDC stock to be range-bound in the short term and lowered the 12-month price target on the stock to $85 from $120. Although Long believes the fundamentals of WDC stock to be solid, a flash storage demand-supply balance is expected to limit the potential improvement in profit margins and revenue growth for the firm. Long stated, “Given the cyclical nature of the memory industry, we believe valuation will remain depressed on the expected slower growth and lower gross margins.” BMO Capital has projected a 7% YoY decline for HDD (hard disk drive) shipments in 2019.